Thursday, February 16, 2012

Guest Post - 5 Creative Ways to Fund Your New Small Business

It takes a lot of guts to run a
small business these days. You need to be your own boss, your own IT team, your
own cleaning crew and, most importantly, your own accountant. Typically, money
is always tight in the first year (or few years for some), and things will only
get tougher if you can’t find sources of financing to support your early growth
track. The problem is that ever since the economic implosion that started back in
2008, the banks have severely tightened their lending criteria. So, what does a small business owner have to
do to find funding for his or her business? Get creative.

To successfully fund your new
business these days, you'll have to think outside the box, over the box and
sometimes even on top of the box.
We’re talking Zappa-style unorthodox here. If you’re not exactly the creative
type though, it might be difficult to conjure up creative financing ideas. In order to help you kick-start the thought
process, we’ve come up with a list of 5 creative ways to fund your small
business.

11)Pitch your business to a local university. Institutions of
higher learning just love seeing small businesses succeed. Universities worldwide
donate millions of dollars in
grants to promising start-ups
every year. If you think your company brings something new to the marketplace,
why not compete for funding from your alma mater? While you might have to take
on a few interns if you win, funding from local universities is a legitimate
option to consider.

22)Try ‘crowd funding’. In years past, crowd funding was simply a euphemism for begging. But in 2012, asking strangers for a little
bit of money has become all the
rage in the start-up community. What makes
crowd funding different than investing is that donors don’t expect to receive a
stake in the business when they hand you $100. Instead, they typically ask for
some sort of recognition or reward. For instance, if you’re opening a bakery,
you might give a few charitable individuals a plaque on the wall and free
cupcakes for life. On balance, it’s another legitimate source of financing that
new small business owners should strongly consider.

33)Sign up for a small business credit card. Small business
credit cards have gotten a bum rap recently, but the truth is
that these cards can actually be incredibly
useful tools for launching and managing the financial aspects of any
small business. They provide great options for
tracking expenses, managing your cash flow and also provide a
great backstop in financial emergencies.

44)Make a deal with the angels. If your business has serious growth potential, an angel investor might
be a source of financing to investigate.
Angel investors
are wealthy businesspeople that are willing to provide capital for promising
start-ups. The only catch is that angel investors will require an equity stake
in the business, which might require a cut of your profits in the short run, an
equity position and a voice in management and strategic direction on a long
term basis.

55)Get a microloan. The SBA maintains a microloan program that
provides small short terms loans to small businesses. Maximum loan amounts are capped at $50,000 but
have an average microloan amount of roughly $13,000. These SBA loans are a great way to fund
working capital needs or to purchase inventory, supplies, machinery or
equipment. While you won't be able to
buy a new lot for that new retro diner you just opened, an SBA microloan might
be enough to provide that new grill you’ve had your eye on.

Sources of financing for small
business have multiplied in recent years, but you still need a very compelling
business model to convince investors that you’re worth their time. The reality
is that securing an angel investment or venture capital funding is highly
unlikely for the vast majority of new businesses. Guy Kawasaki said, “[The] probability of an
entrepreneur getting venture capital is the same as getting struck by lightning
while standing at the bottom of a swimming pool on a sunny day. This may be too optimistic.” The good news is that most small businesses
don’t really need that type of funding.

In the end, the most credible
sources of financing for the vast majority of small businesses will still be a
micro loan, crowd funding or a small business credit card, which are all viable
financing options. All in all, those
options aren’t half bad.

This is a guest contribution from Bill Hazelton, CEO and Founder of Credit Card Assist, a leading
pro-consumer, credit card information resource.